Ask who would fund the investigation after liquidation
Understand investigative funding uncertainty when considering winding up a debtor suspected of asset transfers.
Corporate Recovery Partners
01 / 06
A suspicion does not fund the investigation
You believe the debtor moved assets away and hope liquidation will uncover them. Give the evidence to your lawyer, but ask what investigation could realistically follow. A winding-up order should not be treated as a promise that every suspected transaction will be pursued regardless of the company's resources, available evidence or potential recovery.
Imagine a supplier who saw machinery leave the debtor's yard shortly before payments stopped. Record when it happened, what was observed and any documents available. The movement may have an explanation. Avoid calling it an unlawful transfer as an established fact before the circumstances have been investigated. Accurate leads are more useful than unsupported accusations.
ASIC's liquidation guide explains that, apart from required lodgments and reports, a liquidator is not required to incur winding-up expenses without enough assets to cover costs. It also discusses creditor funding for further work. Ask the adviser how those practical limits should influence expectations before you commit money to the initial legal process.
If funding is later requested, obtain the proposed scope, budget and reporting arrangements. Ask who decides whether to continue, what happens if recovery fails and whether further contributions could be sought. Do not assume that paying investigation costs guarantees reimbursement or gives you ownership of all money recovered. Any proposed arrangement needs independent review.
An initial investigation may establish that an asset was leased, sold properly or worth less than expected. It may also identify a matter warranting further advice. In the supplier's example, the useful result is a tested explanation of the machinery movement. Keep the decision open to evidence that does not support the original suspicion.
Tell the lawyer what commercial outcome you seek and what expenditure the business can consider. Keep the costs of seeking liquidation separate from any later investigative funding decision. Properly documented information may assist the process, but it does not remove the need to assess legal grounds, available resources and the uncertainty of recovering funds for creditors.
